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6 months economic growth
Written by Fatos Çoçoli 8 Maj 2021
Our central bank, the Bank of Albania announced on May 5 that, according to the data of the National Institute of Statistics (INSTAT), the volume of economic activity in the country increased by 3% in the quarter October-December 2020, after three consecutive quarters of decline . Economic growth was supported by the expansion of consumption, investment and exports and was reflected in the improvement of productive and service activities. According to the BoA, economic growth October 2020-March 2021 proves how flexible, adapted to any difficult situation, we have our economy. And on the other hand, the support provided by the monetary incentives provided by the central bank, but also the reduction of infections, the reduction of restrictions and the increase of the trust of citizens and entrepreneurs, in response to the vaccination process. Although the economic activity data for the first quarter of this year January-March 2021 are not direct, they show the continuation of the recovery of the economy. These first six months of "new" economic growth, after the great difficulties of the pandemic in March-September 2020, show the resilience of our economy. At a time when bankruptcies in the ranks of small and medium enterprises were thought of in the thousands and tens of thousands, they were actually counted as such only with the fingers of the hand. Most businesses in distress, from shops to tourism operators, chose to temporarily shift their business to the tax authorities, in order not to pay taxes, in anticipation of the economic recovery. And the revival came. Seven months have passed, October 2020-April 2021, that things are going well for our economy. The most significant indicator is exports. In the first quarter of 2021, they reached pre-pandemic levels. This is not a little. Among exports, the group with the best performance is that of construction materials and metals. The recovery of this sector started in the second half of 2020, with the demand increasing from other neighboring countries, such as Kosovo, Northern Macedonia and Montenegro. Exports of minerals and fuels also increased by almost 40 percent for the quarter of January-March this year. The activity of the main oil producer in our country, Bankers Petroleum, increased in March, but we also managed to significantly export electricity, after the increase of production due to favorable rainy weather. Food, beverages and tobacco have continued their positive trend, marking a 26 percent increase in January-March, on an annual basis. This is also the group of exports that was least affected by the pandemic. Fruit and vegetable exports increased in double digits throughout 2020. Italy was during the first quarter of this year, the country with which we had the largest increase in exports, compared to a year ago, with 16.4 percent. Despite the absurdity of customs barriers with Kosovo, which still continues, we still exported more construction materials, metal and food to Kosovo, 35 percent more than January-March 2020. At the level of the entire economy, the Bank of Albania provided the right amount of paper money (monetary stimulus) to guarantee the normal functioning of commercial banks and financial markets, but also to further stimulate lending to the economy. The Central Bank assisted citizens and businesses by freezing the payment of 20 thousand loans and their interest, or 2 billion euros, for the period March-August 2020. The Bank of Albania strongly encouraged and assisted the restructuring of loans in difficulty, by sounding (restructuring) 186 million euros of such loans only for 2020. As a result, banking activity, lending continues to work quietly, while the exchange rate of the lek against the euro and the dollar appears stable. Credit to the private sector experienced an average annual increase of 7.5% in January-March 2021, compared to January-March 2020. This increase was driven by the increase in loans to both individuals and businesses. Lek loans convincingly surpassed foreign currency loans, accounting for March 2021 52 percent of the total. Commercial banks, driven by the easing policy of the central bank, continued to finance businesses and households, reflecting both the soundness of the banking sector balance sheets and its appropriate response to the Covid-19 shock. In March 2021, the non-performing loan ratio dropped below 8%, recording the lowest value since 2009. In the future, praying for no artificial increase of political tension in our country, the continuation of mass vaccination in the country and around the world, monetary and fiscal aids and the restoration of full consumer and investment confidence among citizens and entrepreneurs will pave the way for sustainable economic growth this year and next. The expansion of business and consumption will be driven by the acceleration of household consumption, the export of goods and services (especially tourism), as well as increasing private investment. In response,